The planned cadastral reform; consequences and tax implications

The much-discussed reform of the cadastre, the implementation of which has been postponed many times, seems to be destined to be implemented.

In the guidelines for the achievement of tax policy goals set for the years 2021-2023, the Minister of the Economy, Daniele Franco, has, indeed, among other things, stressed the importance of supporting operational synergies and activating new forms of cooperation between the central financial administration and local agencies, as well as of encouraging the development of an integrated system that, through specific agreement protocols, contributes to the timely updating of the cadastral archives, also with a view to achieve a fairer taxation.
This goal could refer precisely to the reform of the cadastre, one of the purposes of which is to bring tax values closer to market values.
The perceived inadequacy of the current cadastral system (and in particular of the that for the calculation of the cadastral value of real estate) is related to a number of factors, including changes in market conditions and the failure to adjust cadastral values to inflation (with the exception of a 5% revaluation, performed in 1997, and a 10% increase in the cadastral multiplier).
It should be noted that the calculation of the value of a property for tax purposes (including the application of Inheritance and Gift taxes) is currently based on its cadastral income, i.e. the hypothetical calculation of how much could be derived from renting out the property, and that the surface area of the property, which contributes to the overall calculation, is calculated on the basis of the number of cadastral rooms and not on its dimension expressed in square meters.
The reform (as currently hypothesized) aims at providing that the average real estate asset value be established in relation to the market value expressed in square meters and that the cadastral income be calculated using methodologies similar to those set for the asset value, but focused on the rental value expressed in square meters.
As a result, taxpayers may be subject to a heavier tax burden, since the IMU (“Imposta Municipale Unica” or “Imposta Municipale Propria” – i.e. the municipal property tax), the registration tax, as well as the Inheritance and Gift taxes, are based (also) on the cadastral value of real estate properties.
With regard to IMU (currently not applied to the so-called “main dwelling” except if classified in the cadastral categories A/1, A/8 or A/9, on buildings built and destined to be sold by the builder, on rural properties which are instrumental to a business nor to such areas on which buildings can be constructed and agricultural land), it should be noted that the cadastral value of the properties to which such tax applies (as determined on the basis of the rates year by year set by means of a specific decision by the competent Municipality, within the parameters set out on a national level) in quantified by multiplying the cadastral income, revalued by 5%, and the multiplier corresponding to the cadastral group/category the real property falls within.
With regard to the registration tax, the cadastral value of properties is used as the taxable base, to be multiplied by 126 and then by 9%.
Finally, with regard to the Inheritance and Gift taxes, the cadastral value of the real estate is relevant since it is what is taken into consideration for the purposes of determining the overall value of the estate or the gift(s) to which the relevant tax is to be applied – as well as the corresponding deductible, if applicable.

The revaluation of the cadastral values would, therefore, lead to a reduction in the scope of application of the possible deductible and subsequently to an increase in the relevant tax base, although until a reform of the Inheritance and Gift taxes takes place the tax competitiveness of our country in such respect will not be significantly affected.